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Of all tyrannies, a tyranny sincerely exercised for the good of its victim may be the most oppressive. It may be better to live under robber barons than under omnipotent moral busybodies. The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated, but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience. -- C S Lewis

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Friday, 17 August 2012

So What Should Tobacco Companies Do?

There's quite a bit of chatter about what tobacco companies should do in Australia in the wake of the plain packs ruling. While the sentiment of completely withdrawing from the Australian market is interesting in the "give-them-all-two-fingers" sense, it's really not a good idea for many reasons.

First, it's no way to run a business. Every business makes money by selling it products at a profit. If you do not sell your products, you go out of business.

Second, companies have legal obligations to their shareholders and stakeholders. If a company spitefully withdraws from a market where it can still legally sell its products, it will be sued by its own shareholders.

Third, withdrawing from the market is exactly what the tobacco control industry wants to happen. Remember, this is their plan -- it has been their plan since the 19th century, perhaps earlier. The complete abolition and prohibition of tobacco is what they want. Why the hell would anyone ever give them the satisfaction of that happening?

While I understand and can sympathise with how some of you feel, tobacco companies are not going to voluntarily withdraw from a market. Ever. Best to push it out of your mind...

So what should tobacco companies do? Lawsuits. Hundreds of them, perhaps thousands. So many different lawsuits that the costs to the government are enormous. Will tobacco companies actually do it, though? Well, they will need to part with a good portion of their profits in the short term.

The first and obvious thing to do is to sue the Australian government for the costs of all their intellectual property or trade marks in class 34 (this is the tobacco goods class) that incorporates some kind of design or stylised element. Word marks must be excluded, since you can still use a word trade mark on the pack. But the other trade marks that tobacco companies registered with the Australian IP office that tobacco companies can no longer use, these are the ones they should sue for costs. For instance, costs should be recouped for:

A quick check of the Australian IPO indicates there are well over 3000 registered and pending trade marks in class 34. Many of these are word marks, but many are also stylised designs of an entire pack. That's a lot of money we're talking about. And that's only the class 34 stuff. Other marks are also registered in other classes, like 16 (packaging) or various technology classes. Big money. If the government first grants you a right to use a trade mark on particular goods, and you jump through all of the hoops to do that, and then the gov't takes that right away, the government must compensate you. And it should be noted that companies all over the world register their marks with the Australian IPO. At a stroke, the Australian government has appropriated the private property of companies worldwide and has essentially negated all international trade laws with those companies in other countries. Not suing the government would be foolish.

Coinciding with trade marks, costs should also be recouped for any patents and designs registered with the Australian IPO that can no longer be used. Tobacco companies hold a variety of patents and designs, say for a particular packaging layout. Patent prosecutions are incredibly expensive, and the annual renewal fees for granted patents are also expensive. Attempts at getting all of these costs recouped are paramount.

Next, tobacco companies need to go on the attack, and for once they need to begin to work together rather than fighting each other all the time. (Yes, you're competitors trying to sell more than the others, but for now you need to set that aside and work towards the long term goals. If you win, then you can go back to being nasty to each other.)

The last three decades have seen big tobacco companies accept pretty much all negative legislation against tobacco products because they decided that in the end it would not hurt their profits. The big companies realised that excessive legislation as well as excessive taxes would help them trounce the smaller companies and put the little guys out of business. If it doesn't hurt your market share, why fight it? For instance, display bans benefit the big companies with established, popular brands. People are still going to buy the brands they already use. They will be less likely to try other brands. But this attitude needs to change right now if the big tobacco companies want to survive the onslaught against their brands.

So, how to attack? What are the fronts?

The first front is taxes. Tobacco companies must aggressively sue to reduce the taxation or duty imposed on tobacco products. Plain packs + high taxes will increase the counterfeit and illicit markets substantially. Therefore, a marked reduction of the duty on tobacco will help to reduce the incentives for counterfeiters and help to protect your market share from criminals (and protect consumers, by the way).

The second front is the right to fair representation in governments. The FCTC aims to exclude tobacco companies from any meaningful dialogue with government. I would go as far as saying that not only is this clause of the FCTC illegal, but it violates the principles of a representative democracy, fairness and the right to representation. Every person, indeed every organisation who pays taxes has a right to be heard. So, tobacco companies must sue to re-establish their rights to be represented in government. They must attempt to abolish the FCTC (which is not legally binding anyway, but that's another matter for a later time) or convince governments to abandon it.

The third front is trade sanctions against Australia. Concerted efforts must be made to convince governments (or politicians) around the world to enact legislation to increase the duties on all Australian exports to make Australia less competitive, to really hurt them fiscally. In effect, we should treat Australia as a communist regime, as we do with North Korea. We should not even trade with Australia. That won't happen, but we can try to make every Australian exporter suffer by increasing their costs because of the actions of their government. If the exporters suffer, they themselves will take action against their government.

Organising grass-roots boycotts of all Australian goods, or as a suitable holiday destination, is another tactic that should be employed. Basically, make Australia a pariah country. If that can happen, then other countries will be unlikely to follow with plain packaging laws. It won't be nice, it won't be pretty, but it needs to happen.

The fourth front is the media. The mainstream media, in my opinion, is the greatest enemy of all. If it weren't for media collaboration, the tobacco control industry would be nowhere. The tobacco control industry has used the media to great effect to perpetuate untruths and lies, to stigmatise consumers, and it has far too much influence over editorial decisions. There are a number of reasons why this is so, but this needs to change. Tobacco companies need to work a lot harder than they have been in getting the media to at least present a fair viewpoint that isn't dominated by tobacco control. Tobacco companies should have their fair say. Buy editorial space if you have to. If the media refuse to work with you, find a novel point of law and sue their asses. Likewise, if a health columnist knowingly cites dodgy stats, demand a retraction, or sue both the paper and the reporter. Will you win all the time? No. But you can make life very difficult for them if you're willing to go the extra mile here.

The fifth front is the retailers. Tobacco companies must now, more than ever, give greater incentives to retailers who sell tobacco products. Not just in Australia, but everywhere. The absolute bare minimum margin for a tobacco retailer must be 10%.

The sixth front is lawsuits against the so-called charities and anti-smoking organisations, and dickheads like Chapman and Glantz. For years these charities and their figureheads have got away with saying anything they like without repercussions. That has to change. Now I'm mindful that some companies may not want to deal with the discovery process because they've been burned by it in the past. But if that's case, then get your house in order first. Many of their websites often infringe on your intellectual property and unfairly use your brands. Do something about it. Make their lives very difficult.

The seventh front is better dialogue with the consumers who actually buy tobacco products. Prohibitive legislation aside, tobacco companies are doing a terrible job at communicating with those who legally buy tobacco products. Find a way to engage with us, and we'll continue to buy your goods. In other words,we are sick and tired of being marginalised in the debate. We are weary of being denormalised and treated as a sub-human species by the tobacco control industry and its stooges in the media. This must change, and it has to change right now.

One final front is to be more proactive in other countries that are likely to consider plain packaging laws. Tobacco companies need to work very hard right now with alcohol, fast food, and soft-drink companies to ensure laws are passed to prevent the appropriation of everyone's brands in the future.

So will tobacco companies do all of the above? Probably not. But they should at least try. They might do some of these things anyway, like the IP costs stuff. And the list above is not exhaustive. There are more fronts, more avenues, and tobacco companies need to seek out all of them and utilise all of them. Yes, these things will eat into your profit margins big time for the short term. But the long term view is what you now need to think about. Oh, and you're going to want to hire much better lawyers, solicitors, legal counsel, advocates, etc. You're going to need them. Spend the money.